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Reaction Time – A Reality Check on Service Differentiation

December 10, 2012

It seems there aren’t enough hours in the day, whether it is for consumers and businesses or the employees of the banks and credit unions that serve them. The “need for speed” is changing the way people define service. Friendly is great, but slow and steady no longer win the race. For all of the talk about proactive customer engagement, a customer’s first impression is often from the way a financial institution reacts to a request. Two days to approve a straight-forward business loan and then another week to fund it? Really? Having to visit a branch to open up a simple consumer checking account rather than being able to do it from home…anytime of the day or night? Seriously? No way! Can we all agree that won’t cut it anymore?

Let me start by first giving proactive customer engagement its due. Some of our experts here at D+H are former financial industry executives who blazed trails in database marketing, customer relationship management, and related outreach. Case in point, my colleague Chris Braccia recently wrote about bringing marketing information front and center and presented at CUNA’s Operations Sales & Service Council conference about outreach to the digital generation. To differentiate, proactive outreach is excellent. We are big proponents.

Yet, best practice banks and credit unions build proactive outreach on a foundation of great reactions too. One great example is business lending. Increasingly, building profitable relationships with business customers involves reacting with quick and solid commitments. Business customers need their financial institution to gather necessary information and make a loan decision quickly so they can buy that new piece of equipment or expand that warehouse. Consistent processes for credit files and data gathering -- coupled with related automation – enable financial institutions of all sizes to react better. The right, integrated approach not only eliminates steps, but also reduces the number of times institutions inconveniently go back to their customers for more information about the same decision. By gathering complete information upfront, financial institutions quickly assess risk and respond to customers faster – perhaps instantly or within a matter of hours on the vast majority of decisions.

From recent conversations with bank and credit union executives at Connections, BAI Retail Delivery, and the CUNA Technology Council conferences, it is clear that reacting quickly with loan approvals has helped some of them steal market share from slower (often larger) financial institutions. Many of the leaders are also layering on proactive marketing efforts to take additional wallet share. And, the expansions appear to be within the same risk appetite, so its market and wallet share without additional risk.

The benefits of providing a quick decision will fade if the lender lags on funding the loan. It is important to have an approach that provides the actual loan documentation with the approval process, so closing and funding can take place without time-consuming additional steps or approvals. One bank lending head reported that being “first in line” with a closing-ready proposal and quick funding had allowed his institution to win business it had initially lost because the original lower-cost “winning” bidder took too long to actually provide the funds. That is a classic example of paying for service. Chalk one up for the good guys!

Interestingly, automated lending workflow does more than improve customer or member service. As my colleague Kimberly Songer wrote about data-driven credit risk assessments, institutions also increase consistency and transparency into the overall process. The results are lower administrative resources required to support lenders and fewer audit inquiries with more time to focus on building relationships. As an example, one bank COO recently reported tripling the size of his business loan portfolio while simultaneously cutting loan audit inquiries in half. As seen in recent discussions with Austin Bank, Credit Union 1, Flagstar Bank, Lea County State Bank, and STCU, among others, there are dozens of examples of creating opportunities by preparing people, process, and technology to react well. Or, to channel a little inner Yogi Berra here, maybe get proactive about being reactive!

At a time when transactions are moving increasingly online, great service can no longer just be about the smiling, friendly employee. Consumers and businesses are looking for providers who save them time, respond to their requests quickly and provide the products that make their lives easier. Automation, integration and consistent workflows are helping financial institutions create materially faster turnaround times and stand out in the market.

Author

Tom Berdan
Vice President, Market Development

Tom Berdan capitalizes on his 25 years as a banker and 15 years in the banking software industry, using his expertise to serve as vice president of market development for D+H where he manages industry research and outreach. Prior to that, Tom served as vice president of product management where he oversaw D+H product roadmaps, including core systems, branch automation, self-service and business intelligence. Tom holds an MBA from the University of South Florida, Tampa, and a Bachelor of Business Administration from the University of Wisconsin, Milwaukee.